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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35006 
https://cdn.kscope.io/c57e906dd55013755a587b41811ce1ae-sppi-20220930_g1.jpg
SPECTRUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
______________________________________________
Delaware93-0979187
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Pilot House - Lewis Wharf, 2 Atlantic Ave6th FloorBostonMA02110
(Address of principal executive offices)(Zip Code)

(Registrant’s telephone number, including area code): (617) 586-3900

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueSPPIThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
As of November 7, 2022, 203,205,510 shares of the registrant’s common stock were outstanding.



Table of Contents
Spectrum Pharmaceuticals, Inc.
Quarterly Report on Form 10-Q
For the Three and Nine Months Ended September 30, 2022
TABLE OF CONTENTS
ItemPage
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited):
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 6.
Items 2 through 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.

SPECTRUM PHARMACEUTICALS, INC. ® is a registered trademark of Spectrum Pharmaceuticals, Inc. and its affiliates. REDEFINING CANCER CARE™, ROLVEDON™ and the Spectrum Pharmaceuticals’ logos are trademarks owned by Spectrum Pharmaceuticals, Inc. Any other trademarks are the property of their respective owners.


2


Table of Contents
Part I: Financial Information

Item 1: Financial Statements

SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$56,255 $88,539 
Marketable securities43,997 12,108 
Other receivables586 1,028 
Inventories9,373  
Prepaid expenses and other current assets2,769 2,277 
Total current assets112,980 103,952 
Property and equipment, net422 455 
Facility and equipment under lease1,869 2,505 
Other assets3,658 4,636 
Total assets$118,929 $111,548 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$42,011 $41,258 
Accrued payroll and benefits7,613 11,971 
Total current liabilities49,624 53,229 
Loan payable, long-term28,488  
Other long-term liabilities4,965 10,766 
Total liabilities83,077 63,995 
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
  
Common stock, $0.001 par value; 300,000,000 shares authorized; 203,339,656 and 164,502,013 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
203 165 
Additional paid-in capital1,148,996 1,094,353 
Accumulated other comprehensive loss(3,009)(3,042)
Accumulated deficit(1,110,338)(1,043,923)
Total stockholders’ equity35,852 47,553 
Total liabilities and stockholders’ equity$118,929 $111,548 
See accompanying notes to these unaudited condensed consolidated financial statements.
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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Operating costs and expenses:
Selling, general and administrative$8,263 $12,243 $27,518 $41,515 
Research and development13,335 20,850 33,535 69,335 
Total operating costs and expenses21,598 33,093 61,053 110,850 
Loss from continuing operations before other income (expense) and income taxes(21,598)(33,093)(61,053)(110,850)
Other income (expense):
Interest income, net128 11 256 121 
Other income (expense), net(443)9 (5,534)(7,948)
Total other income (expense)(315)20 (5,278)(7,827)
Loss from continuing operations before income taxes(21,913)(33,073)(66,331)(118,677)
Provision for income taxes from continuing operations(16) (45)(9)
Loss from continuing operations(21,929)(33,073)(66,376)(118,686)
Income (loss) from discontinued operations, net of income taxes4 (11)(39)(227)
Net loss$(21,925)$(33,084)$(66,415)$(118,913)
Basic and diluted loss per share:
Loss from continuing operations$(0.12)$(0.21)$(0.37)$(0.77)
Income (loss) from discontinued operations$0.00 $(0.00)$(0.00)$(0.00)
Net loss per share, basic and diluted$(0.12)$(0.21)$(0.37)$(0.78)
Weighted average shares outstanding, basic and diluted188,358,072 159,261,818 177,818,168 153,341,854 
See accompanying notes to these unaudited condensed consolidated financial statements.

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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net loss$(21,925)$(33,084)$(66,415)$(118,913)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of tax 32 (1)(14)(1,130)
Foreign currency translation adjustments(86)(153)47 (522)
Other comprehensive income (loss) (54)(154)33 (1,652)
Total comprehensive loss$(21,979)$(33,238)$(66,382)$(120,565)
See accompanying notes to these unaudited condensed consolidated financial statements.

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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Common StockAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss 
Accumulated DeficitTotal
Stockholders' Equity
SharesAmount
Balance as of December 31, 2021164,502,013 $165 $1,094,353 $(3,042)$(1,043,923)$47,553 
Net loss— — — — (15,442)(15,442)
Other comprehensive income, net— — — 134 — 134 
Recognition of stock-based compensation expense— — 3,011 — — 3,011 
Restricted stock award grants, net of forfeitures1,675,472 2 (2)— —  
Issuance of common shares to Hanmi Pharmaceutical Co., Ltd.12,500,000 12 19,988 — — 20,000 
Issuance of common stock upon vesting of performance units150,000 — — — — — 
Balance as of March 31, 2022178,827,485 $179 $1,117,350 $(2,908)$(1,059,365)$55,256 
Net loss— — — — (29,048)(29,048)
Other comprehensive loss, net— — — (47)— (47)
Recognition of stock-based compensation expense— — 2,077 — — 2,077 
Issuance of common shares pursuant to at-the-market offering, net of offering costs5,619,827 6 4,941 — — 4,947 
Issuance of common stock for employee stock purchase plan388,541 — 257 — — 257 
Restricted stock award grants, net of forfeitures34,420 — — — — — 
Balance as of June 30, 2022184,870,273 $185 $1,124,625 $(2,955)$(1,088,413)$33,442 
Net loss— — — — (21,925)(21,925)
Other comprehensive income, net— — — (54)— (54)
Recognition of stock-based compensation expense— — 2,547 — — 2,547 
Issuance of common shares pursuant to at-the-market offering, net18,894,118 19 21,594 — — 21,613 
Restricted stock award grants, net of forfeitures(424,735)(1)— — — (1)
Issuance of warrants upon debt financing— — 230 — — 230 
Balance as of September 30, 2022203,339,656 $203 $1,148,996 $(3,009)$(1,110,338)$35,852 

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Common StockAdditional Paid-In CapitalAccumulated
Other Comprehensive Loss 
Accumulated DeficitTotal
Stockholders' Equity
SharesAmount
Balance as of December 31, 2020146,083,110 $146 $1,021,221 $(1,829)$(885,295)$134,243 
Net loss— — — — (35,697)(35,697)
Other comprehensive loss, net— — — (1,678)— (1,678)
Recognition of stock-based compensation expense— — 4,212 — — 4,212 
Issuance of common shares under an at-the-market sales agreement5,678,893 6 21,351 — — 21,357 
Restricted stock award grants, net of forfeitures1,966,333 2 — — — 2 
Balance as of March 31, 2021153,728,336 $154 $1,046,784 $(3,507)$(920,992)$122,439 
Net loss— — — — (50,132)(50,132)
Other comprehensive income, net— — — 180 — 180 
Recognition of stock-based compensation expense— — 4,360 — — 4,360 
Issuance of common stock for employee stock purchase plan163,463 — 474 — — 474 
Issuance of common stock upon exercise of stock options1,250 — 2 — — 2 
Restricted stock award grants, net of forfeitures39,127 — — — —  
Issuance of common stock upon vesting of restricted stock units1,386 — — — — — 
Issuance of common shares under an at-the-market sales agreement 10,172,498 10 31,255 — — 31,265 
Balance as of June 30, 2021164,106,060 $164 $1,082,875 $(3,327)$(971,124)$108,588 
Net loss— — — — (33,084)(33,084)
Other comprehensive loss, net— — — (154)— (154)
Recognition of stock-based compensation expense— — 4,114 — — 4,114 
Restricted stock award grants, net of forfeitures(148,160)— — — — — 
Balance as of September 30, 2021163,957,900 $164 $1,086,989 $(3,481)$(1,004,208)$79,464 

See accompanying notes to these unaudited condensed consolidated financial statements.
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SPECTRUM PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
September 30,
 20222021
Cash Flows From Operating Activities:
Loss from continuing operations$(66,376)$(118,686)
Loss from discontinued operations, net of income taxes(39)(227)
Net loss(66,415)(118,913)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization200 212 
Amortization of debt discount17  
Stock-based compensation 7,635 12,686 
Non-cash lease expense539 1,151 
Other non-cash items88 281 
Loss on disposal of manufacturing equipment 3,057 
Loss on disposal of assets2  
Realized loss (gain) on sale of equity holdings1,094 (4,580)
Unrealized loss on equity holdings 3,352 12,816 
Changes in operating assets and liabilities:
Accounts receivable, net 66 
Other receivables431 (1,391)
Inventories(9,373) 
Prepaid expenses and other current assets(617)1,620 
Other assets976 (89)
Accounts payable and other accrued liabilities389 4,376 
Accrued payroll and benefits(4,360)(1,085)
Other long-term liabilities(5,609)654 
Net cash used in operating activities(71,651)(89,139)
Cash Flows From Investing Activities:
Proceeds from maturities of investments2,799 109,771 
Proceeds from sale of equity holdings2,028 4,406 
Purchases of investments(41,023)(16,568)
Purchases of property and equipment, net(45)(140)
Net cash (used in) provided by investing activities(36,241)97,469 
Cash Flows From Financing Activities:
Issuance of common shares to Hanmi Pharmaceutical Co., Ltd.20,000  
Proceeds from the issuance of debt, net of debt issuance costs28,852  
Proceeds from sale of common stock under an at-the-market sales agreement, net26,560 52,622 
Proceeds from sale of stock under our employee stock purchase plan257 474 
Proceeds from employees for exercises of stock options 4 
Net cash provided by financing activities75,669 53,100 
Effect of exchange rates on cash and cash equivalents(61)(4)
Net (decrease) increase in cash and cash equivalents(32,284)61,426 
Cash and cash equivalents—beginning of period88,539 46,009 
Cash and cash equivalents—end of period$56,255 $107,435 
Supplemental disclosure of cash flow information:
Cash paid for facility and equipment under operating leases$1,492 $1,626 
Cash paid for income taxes$ $12 
Supplemental disclosures of non-cash financing activity:
Issuance of warrants in connection with debt financing$230 $ 
Debt issuance costs in accrued liabilities$152 $ 


See accompanying notes to these unaudited condensed consolidated financial statements.
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Spectrum Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Note 1. Description of Business, Basis of Presentation, And Operating Segment
(a) Description of Business
Spectrum Pharmaceuticals, Inc. (“Spectrum,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company with a strategy of acquiring, developing, and commercializing novel and targeted oncology therapies. Our in-house organization includes clinical development, regulatory, quality, data management, and commercialization.
We have one commercial asset and one drug in late-stage development:
ROLVEDONTM (formerly known as eflapegrastim), a novel long-acting granulocyte colony-stimulating factor (“G-CSF”) for the treatment of chemotherapy-induced neutropenia. On April 11, 2022, we announced that we had received notice that the Biologics License Application (“BLA”) had been accepted and received a Prescription Drug User Fee Act (“PDUFA”) date of September 9, 2022. On September 9, 2022, we received the U.S. Food and Drug Administration’s (“FDA”) marketing approval; and

Poziotinib, a novel irreversible tyrosine kinase inhibitor under investigation for non-small cell lung cancer (“NSCLC”) tumors with various mutations. On December 6, 2021, we announced we submitted our New Drug Application (“NDA”) for poziotinib to the FDA for use in patients with previously treated locally advanced or metastatic NSCLC with HER2 exon 20 insertion mutations. The NDA submission is based on the positive results of Cohort 2 from the ZENITH20 clinical trial, which assessed the safety and efficacy of poziotinib. The product has received Fast Track designation and there is currently no treatment specifically approved by the FDA for this indication. On February 11, 2022, we announced that we had received notice that the NDA had been accepted and received a PDUFA action date of November 24, 2022. On September 22, 2022, we met with the FDA’s Oncologic Drugs Advisory Committee (“ODAC”). ODAC voted 9-4 that the current benefits of poziotinib did not outweigh its risks.

Our business strategy is the development of late-stage assets through commercialization and the sourcing of additional assets that are synergistic with our existing portfolio (through purchase acquisitions, in-licensing transactions, or co-development and marketing arrangements).
(b) Basis of Presentation
Interim Financial Statements
The interim financial data for the three and nine months ended September 30, 2022 and 2021 is unaudited and is not necessarily indicative of our operating results for a full year. We believe the interim data includes normal and recurring adjustments necessary for a fair presentation of our financial results for the three and nine months ended September 30, 2022 and 2021. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations relating to interim financial statements. Certain prior period amounts have been reclassified for consistency with the current year presentation. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and Notes thereto included within our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (filed with the SEC on March 17, 2022).
Discontinued Operations - Sale of our Commercial Product Portfolio
In March 2019, we completed the sale of our Commercial Product Portfolio (as defined below in Note 8) to Acrotech Biopharma LLC (“Acrotech”) (the “Commercial Product Portfolio Transaction”). In accordance with applicable GAAP (ASC 205-20, Presentation of Financial Statements), the revenue-deriving activities and allocable expenses of our sold commercial operations, connected to the Commercial Product Portfolio, are separately classified as “discontinued” for all periods presented
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

within the accompanying Condensed Consolidated Statements of Operations. See Note 8 for further information on the Commercial Product Portfolio Transaction.
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and with the rules and regulations of the SEC. These financial statements include the financial position, results of operations, and cash flows of Spectrum and its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions among these legal entities have been eliminated in consolidation. Substantially all of the accumulated other comprehensive loss is comprised of foreign currency translation adjustments at September 30, 2022.
Liquidity and Capital Resources
The Company expects to incur future net losses as it continues to fund the advancement and commercialization of its product candidates. Based upon our current projections, including our intention to continue to place a disciplined focus on streamlining our business operations, we believe that our $100.3 million in aggregate cash, cash equivalents and marketable securities as of September 30, 2022, will be sufficient to fund our current and planned operations for at least the next twelve months. However, should our costs and expenses prove to be greater than we currently anticipate, or should we change our current business plan in a manner that increases or accelerates our anticipated costs and expenses, we may require additional liquidity earlier than expected. To the extent it becomes necessary to raise additional cash in the future, we will seek to raise it through the public or private sale of debt or equity securities, out-licensing arrangements, funding from joint-venture or strategic partners, debt financing or short-term loans, or through a combination of the foregoing. However, we do not currently have any binding commitments for additional financing. Accordingly, we cannot provide any assurance that we will be able to obtain additional liquidity on terms favorable to us or our current stockholders, or at all. Our liquidity and our ability to fund our capital requirements going forward are dependent, in part, on market and economic factors that are beyond our control. The Company may never achieve profitability or generate positive cash flows, and unless and until it does, the Company will continue to need to raise additional capital.
On September 21, 2022, we entered into a Loan and Security Agreement (“Loan Agreement”), by and among the Company, Allos Therapeutics, Inc., Talon Therapeutics, Inc., and Spectrum Pharmaceuticals International Holdings, LLC, as borrowers (together with the Company, the “Borrowers”), SLR Investment Corp. (“SLR”), as administrative agent (the “Agent”), and the lenders party thereto (the “Lenders”) that provides for a five-year senior secured term loan facility in an aggregate principal amount of up to $65.0 million available to us in four tranches (collectively, the “Term Loans”). As of September 30, 2022, we have drawn a total of $30.0 million of the Term Loans pursuant to the Loan Agreement, with a remaining undrawn principal balance of $35.0 million, which is available through December 31, 2023 and is subject to the achievement of certain milestone events. Refer to Note 5 for additional information.
(c) Operating Segment
We operate one reportable operating segment that is focused exclusively on developing and marketing oncology and hematology drug products. For the three and nine months ended September 30, 2022 and 2021, all of our operating costs and expenses were solely attributable to these activities (and as applicable, classified as “discontinued” within the accompanying Condensed Consolidated Statements of Operations).
Note 2. Summary of Significant Accounting Policies And Use of Estimates
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses. These amounts may materially differ from the amounts ultimately realized and reported due to the inherent uncertainty of any estimate or assumption. On an on-going basis, our management evaluates (as applicable) its most critical estimates and assumptions, including those related to: (i) the realization of our tax assets and estimates of our tax liabilities; (ii) the fair value of our investments; (iii) the valuation of our stock options and the periodic expense recognition of stock-based compensation; (iv) the potential outcome of our ongoing or threatened litigation; and (v) the future undiscounted cash flows and revenues, as well as assesses our ability to fund our operations for at least the next twelve months from the date of issuance of these financial statements.
Our accounting policies and estimates that most significantly impact the presented amounts within these Condensed Consolidated Financial Statements are further described below:
(i) Cash and Cash Equivalents
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Cash and cash equivalents consist of bank deposits and highly liquid investments with maturities of three months or less from the purchase date.
(ii) Marketable Securities
Marketable securities consist of our holdings in equity securities (including mutual funds), bank CDs, government-related debt securities, and corporate debt securities. For equity securities and mutual funds, any realized or unrealized gains (losses) are recognized in “other income (expense), net” within the Condensed Consolidated Statements of Operations. Debt securities and bank CDs are classified as “available-for-sale” investments and (1) realized gains (losses) are recognized in “other income (expense), net” within the Condensed Consolidated Statements of Operations and (2) unrealized gains (losses) are recognized as a component of “accumulated other comprehensive loss” within the Condensed Consolidated Statements of Stockholders’ Equity.
(iii) Inventory
We value our inventory at the lower of cost or net realizable value. Inventory cost is determined on a first-in, first-out basis. We regularly review our inventory quantities and when appropriate record a provision for obsolete and excess inventory to derive its new cost basis, which takes into account our sales forecast and corresponding expiry dates. We have not recognized a provision for obsolete and excess inventory through September 30, 2022.
We received FDA approval for ROLVEDON on September 9, 2022, and on that date began capitalizing inventory purchases of saleable product from certain suppliers. Prior to FDA approval, all saleable product purchased from such suppliers were included as a component of research and development expense, as we were unable to assert that the inventory had future economic benefit until we had received FDA approval.
(iv) Property and Equipment, Net
Our property and equipment, net, is stated at historical cost, and is depreciated on a straight-line basis over an estimated useful life that corresponds with its designated asset category. We evaluate the recoverability of long-lived assets (which includes property and equipment) whenever events or changes in circumstances in our business indicate that the asset’s carrying amount may not be recoverable. Recoverability is measured by a comparison of the carrying amount to the net undiscounted cash flows expected to be generated by the asset group. An impairment loss would be recorded for the excess of net carrying value over the fair value of the asset impaired. The fair value is estimated based on expected discounted future cash flows or other methods such as orderly liquidation value based on assumptions of asset class and observed market data.
(v) Stock-Based Compensation
Stock-based compensation expense for equity awards granted to our employees and members of our Board of Directors is recognized on a straight-line basis over each award’s vesting period. Recognized compensation expense is net of an estimated forfeiture rate, representing the percentage of awards that are expected to be forfeited prior to vesting, and is ultimately adjusted for actual forfeitures. We use the Black-Scholes option pricing model to determine the fair value of stock options and stock appreciation rights (as of the date of grant) that have service conditions for vesting. We use the Monte Carlo valuation model to value equity awards (as of the date of grant) that have combined market conditions and service conditions for vesting.
The recognition of stock-based compensation expense and the initial calculation of stock option fair value requires certain assumptions, including (a) the pre-vesting forfeiture rate of the award, (b) the expected term that the stock option will remain outstanding, (c) our stock price volatility over the expected term (and that of our designated peer group with respect to certain market-based awards), (d) zero dividend yield, and (e) the prevailing risk-free interest rate for the period matching the expected term.
With regard to (a)-(e) above: we estimate forfeiture rates based on our employees’ overall forfeiture history, which we believe will be representative of future results. We estimate the expected term of stock options granted based on our employees’ historical exercise patterns, which we believe will be representative of their future behavior. We estimate the volatility of our common stock on the date of grant based on the historical volatility of our common stock for a look-back period that corresponds with the expected term. We estimate the risk-free interest rate based upon the U.S. Department of the Treasury yields in effect at award grant, for a period equaling the expected term of the stock option and we estimate a zero dividend yield.
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

(vi) Basic and Diluted Net Loss per Share
We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss, basic and diluted loss per share is the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include only stock options, warrants, and other common stock equivalents outstanding during the period to the extent that they are dilutive.
There were 24.2 million shares and 12.7 million shares of outstanding securities (including stock options, restricted stock units, unvested restricted stock awards, stock appreciation rights, and performance awards) as of September 30, 2022 and 2021, respectively, that were excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.
(vii) Income Taxes
Deferred tax assets and liabilities are recorded based on the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
We apply an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods. Our ETR differs from the U.S. federal statutory tax rate primarily as a result of nondeductible expenses and the impact of a valuation allowance on our deferred tax assets, which we record because we believe that, based upon a weighting of positive and negative factors, it is more likely than not that these deferred tax assets will not be realized. If/when we were to determine that our deferred tax assets are realizable, an adjustment to the corresponding valuation allowance would increase our net income in the period that such determination was made.
In the event that we are assessed interest and/or penalties from taxing authorities that have not been previously accrued, such amounts would be included in “provision for income taxes from continuing operations” within the accompanying Condensed Consolidated Statements of Operations for the period in which we received the notice.
(viii) Research and Development Expenses
Our research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, benefits, and other staff-related costs including associated stock-based compensation, laboratory supplies, clinical trial and related clinical manufacturing costs, costs related to manufacturing preparations, fees paid to other entities that conduct certain research and development activities on our behalf and payments made pursuant to license agreements. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. We accrue for costs incurred as the services are being provided by monitoring the status of activities and the invoices received from our external service providers. We adjust our accruals as actual costs become known. Where contingent milestone payments are due to third parties under research and development or license agreements, the milestone payment obligations are expensed in the earliest period that we determine the respective milestone achievement is probable or has occurred.
(ix) Debt Issuance Costs
Debt issuance costs incurred in connection with the Term Loans are classified on the consolidated balance sheet as a direct deduction from the carrying amount of the related debt liability. These expenses are deferred and amortized as part of interest expense in the consolidated statement of operations using the effective interest rate method over the term of the debt agreement. Refer to Note 5 for additional information on the Term Loans.
(x) Recently Issued Accounting Standards
There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), which we do not believe had or will have a material impact on our consolidated financial statements, unless otherwise described below.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

standard becomes effective for us on January 1, 2024, and is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.
Note 3. Fair Value Measurements
We determine measurement-date fair value based on the proceeds that would be received through the sale of the asset, or that we would pay to settle or transfer the liability, in an orderly transaction between market participants. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.
Level 2: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.
Level 3: Unobservable inputs are used when little or no market data is available.
The table below summarizes certain asset and liability fair values that are included within our accompanying Condensed Consolidated Balance Sheets, and their designations among the three fair value measurement categories:
 September 30, 2022
Fair Value Measurements
 Level 1Level 2Level 3Total
Assets:
Money market funds$40,913 $ $ $40,913 
Equity securities258   258 
Government-related debt securities45,158   45,158 
Mutual funds3,551 8  3,559 
Key employee life insurance, cash surrender value(1)
 3,504  3,504 
$89,880 $3,512 $ $93,392 
Liabilities:
Deferred executive compensation liability(2)
$ $7,434 $ $7,434 
$ $7,434 $ $7,434 
(1) Included within other assets on our Condensed Consolidated Balance Sheets, and the amount is based on the stated cash surrender value of life insurance policies of named current and former employees at each period-end.
(2) Included $3.8 million within accounts payable and other accrued liabilities and $3.6 million within other long-term liabilities on our Condensed Consolidated Balance Sheets.
December 31, 2021
Fair Value Measurements
Level 1Level 2Level 3Total
Assets:
Equity securities$5,718 $ $ $5,718 
Money market funds66,322   66,322 
Mutual funds6,390 9  6,399 
Key employee life insurance, cash surrender value(1)
 4,507  4,507 
$78,430 $4,516 $ $82,946 
Liabilities:
Deferred executive compensation liability(2)
$ $11,243 $ $11,243 
$ $11,243 $ $11,243 
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

(1) Included within other assets on our Condensed Consolidated Balance Sheets, and the amount is based on the stated cash surrender value of life insurance policies of named current and former employees at each period-end.
(2) Included $2.0 million within accounts payable and other accrued liabilities and $9.2 million within other long-term liabilities on our Condensed Consolidated Balance Sheets.

We did not have any transfers between “Level 1” and “Level 2” measurement categories for any periods presented.
Our carrying amounts of financial instruments such as cash equivalents, accounts receivable, prepaid expenses, accounts payable, and other accrued liabilities approximate their fair values due to their short-term nature of settlement.
Note 4. Balance Sheet Account Detail
The composition of selected financial statement captions that comprise the accompanying Condensed Consolidated Balance Sheets are summarized below:
(a) Cash and Cash Equivalents and Marketable Securities

We maintain cash balances with select major financial institutions. The Federal Deposit Insurance Corporation (“FDIC”) and other third parties insure a fraction of these deposits. Accordingly, these cash deposits are not insured against the possibility of a substantial or complete loss of principal and are inherently subject to the credit risk of the corresponding financial institution.
Our investment policy requires that purchased investments may only be in highly-rated and liquid financial instruments and limits our holdings of any single issuer (excluding any debt or equity securities that may be received from our strategic partners in connection with an out-license arrangement).
The carrying amount of our equity securities and money market funds approximates their fair value (utilizing “Level 1” or “Level 2” inputs) because of our ability to immediately convert these instruments into cash with minimal expected change in value. There were no material unrealized losses on our investment securities at September 30, 2022 or December 31, 2021.
The following is a summary of our presented composition of “cash and cash equivalents” and “marketable securities”:
Historical or Amortized CostFair
Value
Cash and Cash
Equivalents
Marketable
 Securities
September 30, 2022
Money market funds$40,913 $40,913 $40,913 $ 
Equity securities(1)
 258  258 
Government-related debt securities45,172 45,158 4,970 40,188 
Mutual funds2,146 3,551  3,551 
Bank deposits10,372 10,372 10,372  
Total cash and cash equivalents and marketable securities$98,603 $100,252 $56,255 $43,997 
December 31, 2021
Equity securities$3,512 $5,718 $ $5,718 
Money market funds66,322 66,322 66,322  
Bank deposits22,217 22,217 22,217  
Mutual funds5,218 6,390  6,390 
Total cash and cash equivalents and marketable securities$97,269 $100,647 $88,539 $12,108 
(1)Our aggregate equity holdings consist of 0.4 million common shares of Unicycive Therapeutics, Inc., a NASDAQ-listed biopharmaceutical company, with a fair market value of $0.3 million as of September 30, 2022. We completed the sale of 0.4 million shares of common stock and recognized a $0.4 million gain within “other expense, net” within the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022. Additionally, we completed the sale of our remaining 0.9 million shares of CASI Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, common stock and recognized a $1.9 million loss within “other expense, net” within the accompanying Condensed
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Consolidated Statements of Operations for the nine months ended September 30, 2022. We no longer hold any shares of CASI Pharmaceuticals, Inc.
(b) Inventories
Upon approval of ROLVEDON on September 9, 2022, we began capitalizing our purchases of saleable inventory of ROLVEDON from suppliers. Inventories consist of the following:
September 30, 2022December 31, 2021
Raw materials$9,000 $ 
Work-in-process373  
Finished goods  
Inventories$9,373 $ 
(c)  Accounts Payable and Other Accrued Liabilities
“Accounts payable and other accrued liabilities” consists of the following:
September 30, 2022December 31, 2021
Trade accounts payable and other $35,005 $33,408 
Lease liability - current portion752 1,282 
Commercial Product Portfolio accruals (Note 8)6,254 6,568 
Accounts payable and other accrued liabilities $42,011 $41,258 
Amounts presented within “accounts payable and other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets for our categories of gross-to-net (“GTN”) estimates related to the Commercial Product Portfolio accruals were as follows:
Commercial/Medicaid Rebates and Government ChargebacksDistribution, Data, Inventory and
GPO Administrative Fees
Product Return AllowancesTotal
Balance as of December 31, 2020$2,601 $942 $4,299 $7,842 
(Less): Payments and credits against GTN accruals (1,159) (115)(1,274)
Balance as of December 31, 20211,442 942 4,184 6,568 
(Less): Payments and credits against GTN accruals (50) (264)(314)
Balance as of September 30, 2022$1,392 $942 $3,920 $6,254 
Note 5. Loan Payable

On September 21, 2022, we entered into the Loan Agreement that provides for a five-year senior secured term loan facility in an aggregate principal amount of up to $65.0 million, available to us in four tranches. Upon entering into the Loan Agreement in September 2022, we borrowed $30.0 million in term loans (the “Term A Loan”). Under the terms of the Loan Agreement, we may borrow up to an additional $35.0 million in term loans subject to us achieving the following milestones:
a.Through December 20, 2022, $10.0 million (the “Term B Loan”) if we provide satisfactory evidence that the FDA has approved the New Drug Application (“NDA”) for poziotinib for non-small cell lung cancer in previously treated patients with HER2 exon 20 insertion mutations with a label materially consistent with our filing of such NDA;
b.Through May 15, 2023, $15.0 million (the “Term C Loan”) if we provide satisfactory evidence that we have achieved a minimum of $15.7 million in Net Product Revenue (as defined in the Loan Agreement) calculated on a trailing six (6) month basis for any measuring period ending on or prior to March 31, 2023; and
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

c.Through November 15, 2023, $10.0 million (the “Term D Loan”) if we provide satisfactory evidence that we have achieved a minimum of $40.0 million in Net Product Revenue calculated on a trailing six (6) month basis for any measuring period ending on or prior to September 30, 2023.
The Loan Agreement contains customary events of default and representations, warranties and affirmative and negative covenants, including financial covenants requiring the Company to (i) maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent of at least $25.0 million at all times commencing from September 21, 2022 and ending on the later of (A) July 31, 2023 and (B) the date Company either (1) receives, on or after September 13, 2022, at least $40.0 million in net cash proceeds from equity raises and/or business development or collaboration agreements or (2) (x) receives, on or after September 13, 2022, at least $30.0 million in net cash proceeds from equity raises and/or business development or collaboration agreements and (y) achieves at least $25.8 million in trailing 6-month net revenue from the sale of any products (on or prior to the period ending July 31, 2023) and (ii) maintain, commencing March 31, 2023, on a monthly basis until the end of 2023, and on a quarterly basis thereafter, either (A) net revenue from the sale of any products of at least $100 million on a trailing 12-month basis, or (B) net revenue from the sale of any products of an amount set forth in the Loan Agreement, on a trailing 6-month basis.
The Term Loans will be guaranteed by certain of our subsidiaries (the “Guarantors”). Our obligations under the Loan Agreement are secured by a pledge of substantially all of our assets and will be secured by a pledge of substantially all of the assets of the Guarantors.
The Term Loans bear interest at a floating rate per annum equal to the 1-Month CME Term SOFR (subject to a 2.3% floor) plus 5.7%. Interest-only payments are due beginning on November 1, 2022 through September 30, 2025, and the interest-only period may be extended to September 30, 2026 (“Principal Extension”) provided the Company and its subsidiaries have achieved a minimum of $40.0 million in net product revenue on a trailing six-month basis for any measuring period ending on or prior to September 30, 2023. We are also required to make monthly principal payments beginning on October 1, 2025 in an amount equal to 1/24th of the aggregate amount of the Term Loans outstanding if the Principal Extension is not executed, or, beginning on October 1, 2026, 1/12th of the aggregate amount of the Term Loans outstanding if the Principal Extension is executed. On the Maturity Date, we are required to pay in full all outstanding Term Loans and other amounts owed under the Loan Agreement.
At the time of borrowing any tranche of the Term Loans, we are required to pay an upfront fee of 1.0% of the aggregate principal amount borrowed at that time. We may prepay all of the Term Loans, and are required to make mandatory prepayments of the Term Loans upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law). All mandatory and voluntary prepayments of the Term Loans are subject to prepayment premiums equal to (i) 3% of the principal prepaid if prepayment occurs on or before September 21, 2023, (ii) 2% of the principal prepaid if prepayment occurs after September 21, 2023 but on or before September 21, 2024, or (iii) 1% of the principal prepaid if prepayment occurs after September 21, 2024.
We will pay facility fees and success fees upon borrowing the future tranches as follows:
a.Facility fee of $0.1 million and success fee of 0.75% of the principal of the Term B Loans,
b.Facility fee of $0.2 million and success fee of 0.75% of the principal of the Term C Loans, and
c.Facility fee of $0.1 million and success fee of 0.75% of the principal of the Term D Loans.
In addition, we are required to pay an exit fee in an amount equal to 4.75% of all principal repaid, whether as a mandatory prepayment, voluntary prepayment, or a scheduled repayment. In connection with the Loan Agreement, we granted warrants (“Warrants”) to the Lenders to purchase up to 454,454 shares of our common stock at an exercise price of $0.66 per share, which had a fair market value at time of issuance of $0.2 million. The number of shares and exercise price are subject to anti-dilution adjustments for splits, dividends, capital reorganizations, reclassifications and similar transactions. Upon borrowing the future tranches, we will issue warrants to the Lenders to purchase an aggregate number of shares of common stock equal to 1.0% of the Term Loan amount funded divided by the applicable Exercise Price (as defined below). The Exercise Price is defined as the lesser of (a) the 10-day trailing average of the Company’s closing common stock price ending on the trading day immediately prior to the funding date of the applicable Term Loan and (b) the Company’s closing common stock price on the trading day immediately prior to the funding date of the applicable Term Loan. The Warrants are immediately exercisable, and the exercise period will expire 10 years from the date of issuance. During our evaluation of equity classification for the Warrants, we considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entitys own Equity. The Warrants do not fall under the liability criteria within ASC 480, Distinguishing
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Notes to Condensed Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, interest rate, and number of years)
(Unaudited)

Liabilities from Equity as they are not puttable and do not represent an instrument that has a redeemable underlying security. The Warrants do meet the definition of a derivative instrument under ASC 815, but are eligible for the scope exception as they are indexed to our common stock and would be classified in permanent equity if freestanding.
The Loan Agreement contains customary events of default that entitle SLR to accelerate the repayment of the Term Loans, and to exercise remedies against the Borrowers and the collateral securing the Term Loans. Upon the occurrence and for the duration of an event of default, an additional default interest rate of 4.0% will apply to all obligations owed under the Loan Agreement.
In September 2022, we borrowed $30.0 million upon the signing of the Loan Agreement and incurred debt issuance costs of $3.0 million, including the exit fee of $1.4 million, that are classified as contra-liabilities on our condensed consolidated balance sheets and are being recognized as interest expense over the term of the loan using the effective interest method. During the three and nine months ended September 30, 2022, we recognized interest expense related to the Term Loans of approximately $0.1 million, approximately $17 thousand of which was noncash.
The following table summarizes the composition of Term Loans payable as reflected on the condensed consolidated balance sheet as of September 30, 2022 (in thousands):

September 30, 2022
Gross proceeds$30,000 
Accrued exit fee1,425 
Unamortized debt discount(2,937)
Carrying value$28,488 

The aggregate maturities of Loan Payable as of September 30, 2022 are as follows (in thousands):
September 30, 2022
2022$ 
2023